The plan for comprehensive restructuring PVN

08:37 |19/04/2018

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Vietnam Oil and Gas Group (PVN) has sent an official letter to the Ministry of Industry and Trade on the plan for comprehensive restructuring PVN in 2017-2025 period, in which there is a proposal to promulgate the amended Petroleum Law with the specific provisions for oil and gas exploration and exploitation in the direction of maximally applying the conditions of the specialized law in conformity with international practice.

The contents of the letter include the following issues:

A lot of internal difficulties

The problems that PVN faced recent years are: i) in administration, although the internal regulatory systems are relatively sufficient and regularly updated but there is still lack of synchronization and did not keep up with fluctuations and changes of market economy, ii) The organization system has not been streamlined, duplicated multi-level, the responsible clues do not thoroughly handle the problems, there is a lack of close coordination between the specialized departments, iii) In investment activities, the portfolio management is unprocessed and unprofessional, the investment is spread out, resulting in low capital mobilization and investment efficiency, iv) the financial and cost management is without the system and timely decisions. At the some subsidiaries there are no norms, costs and debt management is not good… v) The human resource training and developing implementation is slow then plan. Training activities cannot follow-up the specific characteristics of the PVN. The scientific research and technological applying have also many inadequacies.

The comprehensive restructure

The view-point of PVN in this case is to concentrate in strong developing the organic and mutual link of the value chain of oil and gas exploration, exploitation and processing into the industry in order to bring into full play the strengths and advantages of the sector and increase the competitiveness in the country and participate in investment to the oversea countries

PVN will continue to divest from the service bases (before and after 2020 as soon as possible) and from the electricity bases (before and after 2025 as soon as possible).

PVN will also reallocate, optimize resources between production and business activities through equitization, divestment, M&A, new investments under the market mechanism, take efficiency as the core targets and eliminate internal competition

Production and business operation is also reorganized for reducing the dependency and at the same time, perfecting the management system according to international standards.

The PVN restructure will be carried out by two phases:

In the first phase (2017 - 2020) PVN would complete equitization in 3 companies as BSR, PVP and Pvoil. PVN would also prepare the conditions for equitization in PVEP as soon as possible after 2020, merger PVU and VPI into the Petroleum Institute (expected by 2020), the divesting in the units, making healthy of and restructuring financial situation in units/projects with losses.

In phase 2 (2021 - 2025), PVN will continue to maintain the main investment in 4 key areas but reduce the dominance, take only dominance (> 50%) for gas exploration and exploitation.

PVN continues to increase market capitalization in petroleum exploration, exploitation, processing and electricity generation. PVN should withdraw all capital from service units, except for high-grade petroleum technical services for upstream.

After 2025 to 2035, PVN continues to maintain its organic linkage in three main areas: oil and gas exploration and exploitation and processing, specialized high-tech services for oil and gas direct exploration and exploitation.

The need of “specific” mechanism

In the period from now to 2020, PVN proposes to the National Assembly, the National Assembly Standing Committee, and Government to consider and promulgate a number of specific regulations on petroleum activities, which are applicable to projects in oil and gas exploration and exploitation, managing oil and gas contracts, costs, sharing interest, extracting funds and mechanism for tax definition for oil and gas project development.

PVN asks Ministry of Finance to make mechanism for extracting the reserves to offset risks in oil and gas exploration operation with a 30% pre-tax profit, and mechanism to establish a fund for oil and gas exploration and exploitation with a rate of 17% of overturn from oil and gas projects (except VSP); to allow PVN to retain a minimum of 32% of petroleum interest of the Host Country from Petroleum Products Sharing Agreements and to consider supplementing PVN's provisions for oil and gas revenues, excluding the expense for PVN to carry out actual special tasks and 100% profit from the annual activities of Vietsovpetro Joint Venture.

PVN suggests the Ministry of Industry and Trade to consider and submit to competent authorities specific mechanisms to attract foreign investment in petroleum activities in the country, taking priority into deep water, offshore, sensitive areas, the small fields and the fields with marginal economic conditions.

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